What is holacracy and why does it work for Zappos?

Sarah K. White |
Aug. 6, 2015

Zappos made headlines in 2013 when it announced plans to transition to holacracy -- a management-free corporate structure. One of the biggest motivating factors behind Zappos' decision to restructure isn't that different from what plenty of other well-established companies are seeking: cultivating a startup culture.

There are dedicated circles for hiring, firing and dolling out raises, and they aren't specific to one department, they serve the entire organization. And performance reviews still exist, sort of. It's up to the specific team, or circle, to decide if they want to perform what Zappos calls, "culture performance reviews."

Not everyone is on board

The idea of "no-bosses" might sounds great to some people, but the fact is that plenty of Zappos employees weren't that excited about the way Zappos chose to restructure the company. But as a company that prides itself on individuality, Zappos didn't ignore wary employees. Anyone who wasn't interested in going forward without a more traditional structure was welcomed to quit by April 30, 2015 with three months' pay. Ultimately, 210 employees chose to leave, but for many it wasn't actually out of a sense of dissatisfaction or unhappiness, but out of a unique opportunity to take a lump sum of money to travel or make a career change.

But, even with 210 opting to leave Zappos, there are another 1,000 plus employees who chose to stay. And although it's been a learning experience, one of the strongest benefits of holacracy has been unearthing the potential of Zappos' employees, according to Sams. "I've seen quite a few ideas that have previously been shot down under the old structure that have actually manifested themselves and got off the ground." People who may have remained under the radar are now given the tools and motivation to step up and show that they can be strong leaders. Since people don't have to wait in line for promotions, it gives everyone the opportunity to demonstrate their ability to manage, lead, and direct others to success.